Prop 30: Southern California vs Texas

[CA renter]

Texas:

“The truth behind the numbers

The numbers cited sure look impressive, but a closer look tells a slightly different story, and even in comparison to the rest of the economy, it’s far from impressive.

According to the Bureau of Labor Statistics, overall nonfarm employment in April of 2009 in Texas stood at roughly 10,343,000 Texans employed. Two years later in April of 2011, that number increased to 10,554,000, for an increase of just 2%. Unemployment in the state in April 2009 stood at 7.2%. The current unemployment rate has risen to 8%.

Even more damning, though, are the wage figures. As noted by a story in The American Independent, the figures are not adjusted for the differences in the cost of living, so there is some leeway in the interpretation, but still the facts are not in Texas’ favor: The average wage in Texas in December of 2007 was $790 per week, or $41,000 per year. California, in comparison, had an average weekly wage of $850 or $45,000 per year. The national average at the time was $750 and $39,000, respectively.

Fast forward to today and in Texas nothing has changed. Average wages are $790 and $41,000, equal to the current national average. In California the average wage has risen to $930 and $48,000.

Even worse, according to The American Independent story, in 2010 550,000 workers in Texas were working at jobs that paid at or below the minimum wage, or 9.5% of the state’s hourly workforce, tying them with Mississippi for the largest percentage of minimum wage workers in the U.S. In California the minimum wage workforce tallied in at less than 2%.

Since what economists dubbed the end of the recession in 2009, California has seen its average wage increase by 9.3%, as opposed to a 0.6% increase in Texas. From 2007 to present, Texas saw a 150% increase in the minimum wage workforce, and 16% since 2010.

Massive budget problems

Despite all of this alleged growth and expansion of jobs and the Texas economy, the state is still facing massive budget shortfalls. Sure, they tout a “balanced budget,” but they relied on parlor tricks and a lot of help to get there.

Recall that in 2009 Rick Perry had some choice words for the Obama administration about the stimulus program and the “bailouts” to Wall St. and to the states. He pledged that over his dead body would his state seek a handout from the federal government, and he would not accept any stimulus money from Washington.

But the state was facing down a $6.6 billion shortfall in the 2010-2011 budget, so at the same moment that he denounced the stimulus, he held his hand out and snatched $6.4 billion in stimulus funds, allowing the state to close its budget hole. The state didn’t raise taxes, and it didn’t have to raid its “rainy day fund” that had $9.1 billion in cash sitting there. Crisis averted thanks to the American Recovery and Reinvestment Act.

With no stimulus dollars to lean on for the 2012-2013 budget, Texas faced a $27 billion shortfall according to the state comptroller. And with tax revenues expected to be down by over $15 billion from the last budget term (the Texas legislature meets every two years, and the budget is done in two year cycles), things don’t look to be getting any better. The legislature already had to dip into that rainy day fund to the tune of over $3 billion to cover an unexpected gap in the 2009-2010 budget.

The remaining $6 billion in the rainy day fund, according to even Republican state lawmakers, is already accounted for in the new budget.

Sure Texas lawmakers will tell us that the 2012-13 budget is balanced, but it took a series of parlor and accounting tricks to get there (and for the record, California Governor Jerry Brown vetoed a budget approved by California Democrats that included similar such gimmicks).

Gone is $4 billion in funding for k-12 education. There are also massive funding cuts to higher education and public services. Gone is $10 billion for child support services, even with 25% of the state’s children living in poverty. The legislature also pushed a due date back by one day of over $2 billion in education funding, rolling that bill over onto the 2014-15 budget cycle.

It is expected that some 50,000 teachers statewide will lose their jobs due to this new budget. This despite an expected increase in school enrollment by 80,000 students. Texas is already one of the least educated states, ranking dead last in the nation in the percentage of the population over age 25 who have earned a high school diploma.

The coup de grace, though, is the deliberate underfunding of state Medicaid programs to the tune of $4.8 billion. It’s a program that Republicans want to do away with anyway, and with a hard right wing Republican dominated state government, why should they fund it?

Texas, by the way, leads the nation in the percentage of its population without any healthcare coverage at all, with 26.8% of the state uninsured. Not good for the second largest state in the Union.”

Texas vs. California: Is the Lone Star State’s economy really that much better off than the Golden State’s?

[CA renter]

[quote=spdrun]Frankly, in an ideal state, R.E. taxes would approach zero, and all revenue would be from income and sales tax.[/quote]

I tend to agree with that, but only for a single primary residence. For corporations/entities that make their money in RE, it’s appropriate to tax it, IMHO.

[CA renter]

[quote=bearishgurl][quote=CA renter]…I know an owner of an older, mid-sized apartment complex in LA, and their property taxes are less than $12,000/year![/quote]

Do you know how many units are in this complex and their approximate composition (ie 40-1br, 30-2 br and 16 3-br units)?

This would shed some light on the per-unit breakdown of that $12K tax bill.

Thx.[/quote]

BG,

It’s a ~24-unit building in a busy, expensive area near LA. Just checked, and their current tax bill is for ~$14,000, so it’s a bit higher than what I last heard, but still…

Not sure of the exact unit setup, but there are at least a few 3/2s, with probably half (or more) being 2/2s. The rest are 1/1s, and I’m not even sure if they have any studios. The property is probably worth a few million (~$3 million, probably more).

[bearishgurl]

[quote=CA renter]BG, I don’t even think we need to worry about the inherited aspect of Prop 13, as long as it was for a **single primary residence,** but do think that we need to allow people to EITHER:

-retain the Prop 13 basis and disallow the stepped-up cost for cap gains upon sale

OR

-allow the heirs to step up the cost basis for cap gains, and use this value for property taxes.

It has to be one or the other. It is totally wrong that heirs get to use their ancestors’ cost basis for property taxes, and then use the stepped-up value for cap gains…[/quote]

I agree with this, given the current realities.

But fundamentally, I believe Props 58 and 193 should be repealed, as they are NOT in keeping with the original intent of Prop 13, which was to keep seniors from being taxed out of their homes. An able-bodied young parent with minor children (heavily using public school services and all other local services) can ostensibly “inherit” a primary residence and in doing so “inherit” the same assessment (+2% snnually) of the parent/grandparent who left it to them. They often have the means to pay the tax based upon the stepped-up basis upon death being equal to the *new* assessment … but … they aren’t required to and never will be as long as they own the property. It’s a “loophole” which amounts to unjust enrichment (to varying degrees) at the expense of similarly-situated taxpayers who purchased their properties after April 1978. This “loophole” will go on into perpetuity and will have the effect of keeping the vast majority of CA’s most valuable and best-located properties off the market. There is LITTLE TO ZERO INCENTIVE for these longtime owners (or their heirs) to EVER sell … unless they have no heirs to leave their property to or none of them want the property upon their deaths (rare).

A Prop-13 protected tax bill for a ~1600 sf SFR in a “working class” area of SD was currently about $368 at the time of a 2011 death. 1.02 x $368 = $375 (heir’s tax bill for 2012) …. and so on. Their assessments are coming from such a low floor that it will likely never come close to hitting their property’s fair market value in their lifetimes!

The fallout of Props 58 and 193 have had the unintended consequences of severely reducing CA’s city, county and school budgets and Teeter funds (which run the courts and prisons), and are/will be playing a HUGE role in eventually bankrupting our state!

This problem, created by our (misguided) Legislature in the 80’s, is not small. A HUGE AMOUNT of property owners have availed themselves of these perks and will continue to do so with nearly every death of a longtime CA property owner.

Prop 13 (as it applies to the original owners who still own the same property today, will eventually become moot with the deaths of its last beneficiaries (approx 2040), assuming Props 58 and 193 are repealed.

Repeal of Props 58/193 would go a long way in getting CA out of the fiscal “black hole” it has managed to get itself into, IMO.

[bearishgurl]

[quote=CA renter][quote=bearishgurl][quote=CA renter]…I know an owner of an older, mid-sized apartment complex in LA, and their property taxes are less than $12,000/year![/quote]

Do you know how many units are in this complex and their approximate composition (ie 40-1br, 30-2 br and 16 3-br units)?

This would shed some light on the per-unit breakdown of that $12K tax bill.

Thx.[/quote]

BG,

It’s a ~24-unit building in a busy, expensive area near LA. Just checked, and their current tax bill is for ~$14,000, so it’s a bit higher than what I last heard, but still…

Not sure of the exact unit setup, but there are at least a few 3/2s, with probably half (or more) being 2/2s. The rest are 1/1s, and I’m not even sure if they have any studios. The property is probably worth a few million (~$3 million, probably more).[/quote]

If this building in a “busy, expensive area near LA” was purchased today at just $3M, its first full tax bill would be just over $35K. That is $21K more than they’re currently paying.

And not to be too facetious-sounding, but pray tell, are these owners the ones who bought it before April 1978 or are they “heirs?” Do they have any outstanding mortgages against it?

And what is the gross annual rental income of this building, if you know ….

Just curious ;=]

[CA renter]

[quote=bearishgurl][quote=CA renter][quote=bearishgurl][quote=CA renter]…I know an owner of an older, mid-sized apartment complex in LA, and their property taxes are less than $12,000/year![/quote]

Do you know how many units are in this complex and their approximate composition (ie 40-1br, 30-2 br and 16 3-br units)?

This would shed some light on the per-unit breakdown of that $12K tax bill.

Thx.[/quote]

BG,

It’s a ~24-unit building in a busy, expensive area near LA. Just checked, and their current tax bill is for ~$14,000, so it’s a bit higher than what I last heard, but still…

Not sure of the exact unit setup, but there are at least a few 3/2s, with probably half (or more) being 2/2s. The rest are 1/1s, and I’m not even sure if they have any studios. The property is probably worth a few million (~$3 million, probably more).[/quote]

If this building in a “busy, expensive area near LA” was purchased today at just $3M, its first full tax bill would be just over $35K. That is $21K more than they’re currently paying.

And not to be too facetious-sounding, but pray tell, are these owners the ones who bought it before April 1978 or are they “heirs?” Do they have any outstanding mortgages against it?

And what is the gross annual rental income of this building, if you know ….

Just curious ;=][/quote]

The fair market value of this property is at least that much. They are the second owners of the building, and bought it in the early 70s.

Not sure about the gross annual rents but a total guess would be around $390K on the low side. They don’t do much to improve or maintain it, so expenses are low, and they own it outright.

[CA renter]

[quote=bearishgurl][quote=CA renter]BG, I don’t even think we need to worry about the inherited aspect of Prop 13, as long as it was for a **single primary residence,** but do think that we need to allow people to EITHER:

-retain the Prop 13 basis and disallow the stepped-up cost for cap gains upon sale

OR

-allow the heirs to step up the cost basis for cap gains, and use this value for property taxes.

It has to be one or the other. It is totally wrong that heirs get to use their ancestors’ cost basis for property taxes, and then use the stepped-up value for cap gains…[/quote]

I agree with this, given the current realities.

But fundamentally, I believe Props 58 and 193 should be repealed, as they are NOT in keeping with the original intent of Prop 13, which was to keep seniors from being taxed out of their homes. An able-bodied young parent with minor children (heavily using public school services and all other local services) can ostensibly “inherit” a primary residence and in doing so “inherit” the same assessment (+2% snnually) of the parent/grandparent who left it to them. They often have the means to pay the tax based upon the stepped-up basis upon death being equal to the *new* assessment … but … they aren’t required to and never will be as long as they own the property. It’s a “loophole” which amounts to unjust enrichment (to varying degrees) at the expense of similarly-situated taxpayers who purchased their properties after April 1978. This “loophole” will go on into perpetuity and will have the effect of keeping the vast majority of CA’s most valuable and best-located properties off the market. There is LITTLE TO ZERO INCENTIVE for these longtime owners (or their heirs) to EVER sell … unless they have no heirs to leave their property to or none of them want the property upon their deaths (rare).

A Prop-13 protected tax bill for a ~1600 sf SFR in a “working class” area of SD was currently about $368 at the time of a 2011 death. 1.02 x $368 = $375 (heir’s tax bill for 2012) …. and so on. Their assessments are coming from such a low floor that it will likely never come close to hitting their property’s fair market value in their lifetimes!

The fallout of Props 58 and 193 have had the unintended consequences of severely reducing CA’s city, county and school budgets and Teeter funds (which run the courts and prisons), and are/will be playing a HUGE role in eventually bankrupting our state!

This problem, created by our (misguided) Legislature in the 80’s, is not small. A HUGE AMOUNT of property owners have availed themselves of these perks and will continue to do so with nearly every death of a longtime CA property owner.

Prop 13 (as it applies to the original owners who still own the same property today, will eventually become moot with the deaths of its last beneficiaries (approx 2040), assuming Props 58 and 193 are repealed.

Repeal of Props 58/193 would go a long way in getting CA out of the fiscal “black hole” it has managed to get itself into, IMO.[/quote]

Maybe I’m missing something, but the people who inherit from parents who bought after 1978 also benefit from Prop 13. Why is it important that the property be purchased before 1978? Aren’t the benefits the same for every home buyer and their heirs, whether or not they buy before or after 1978? Am I missing something?

Personally, I have strong beliefs about private property rights, especially WRT property that is for personal use, like a single primary residence. Like spdrun mentioned above, I think that property taxes on personal property should be very low or non-existent (up to a limit).

While I understand your arguments, I think that we could fix the budget problems by eliminating the benefits for corporate entities, owners of large tracts of land over a certain size and within certain zones, investors, etc. Prop 13 was about preventing people from being taxed out of their homes by capping increases at 2%/year. I believe this is the right thing to do, whether the person is the first owner or an heir. In the cases I know where the heir moved into the parents’ properties, they were not rich, and could not have afforded the higher property taxes. Again, if the heirs are not living in these homes as a primary residence, then they should lose the Prop 13 protection, IMHO.

Also, FWIW, most of the people I know who’ve inherited homes tend to sell them because they are not willing to maintain these homes (usually much older and in need of a lot of repairs), and they just don’t want to be landlords. More often than not, there are multiple heirs, and they usually end up selling the house. These days, most kids live away from their parents, so they don’t want to live in their parents house, which would make the inheritability of Prop 13 moot if we were to move to the system I’m advocating for.

[paramount]

Yet another perfect example of gov’t worker abuses in California and another good reason to leave the state.

When I saw the title of the story, I just knew it had to be about a city in California.

And CAR, no I’m not on auto-record, it’s just a reflection of the magnitude of the injustice.

Well, see for yourself:

http://www.cnn.com/video/?hpt=hp_t3#/video/politics/2012/11/26/ac-pkg-lah-police-chief-corruption.cnn

[no_such_reality]

[quote=CA renter][quote=spdrun]Frankly, in an ideal state, R.E. taxes would approach zero, and all revenue would be from income and sales tax.[/quote]

I tend to agree with that, but only for a single primary residence. For corporations/entities that make their money in RE, it’s appropriate to tax it, IMHO.[/quote]

Wow you guys are completely wrong.

In an ideal and fair world, income taxes would be zero and R.E and property (ASSETS) taxes and sales taxes would pay it all.

in other words, actually tax wealth and consumption, not production.

The tax on consumption, sales tax, is so those that consume their entire production have some skin in the game.

[sdduuuude]

[quote=CDMA ENG][quote=sdduuuude][quote=cvmom][quote=CDMA ENG]I also use to have a friend that said that you could deduce the true cost of living in a city by only looking a the cost of a jug of milk.[/quote]

Reminds me of the Big Mac index that the Economist uses to compare cost-of-living.[/quote]

From this I can conclude that the cost of living in an airport or professional sports venue must be incredibly high.[/quote]

I take if you are refering to the Micky Ds and not the jug of milk.

CE[/quote]

Either.

[CA renter]

[quote=no_such_reality][quote=CA renter][quote=spdrun]Frankly, in an ideal state, R.E. taxes would approach zero, and all revenue would be from income and sales tax.[/quote]

I tend to agree with that, but only for a single primary residence. For corporations/entities that make their money in RE, it’s appropriate to tax it, IMHO.[/quote]

Wow you guys are completely wrong.

In an ideal and fair world, income taxes would be zero and R.E and property (ASSETS) taxes and sales taxes would pay it all.

in other words, actually tax wealth and consumption, not production.

The tax on consumption, sales tax, is so those that consume their entire production have some skin in the game.[/quote]

Sales taxes and (some) property taxes are regressive. Wealth (property) comes about as a result of income, so I’d prefer to tax it on the front end when it’s earned. Once somebody owns something, it should (generally) not be taxed, IMHO.

[CA renter]

[quote=paramount]Yet another perfect example of gov’t worker abuses in California and another good reason to leave the state.

When I saw the title of the story, I just knew it had to be about a city in California.

And CAR, no I’m not on auto-record, it’s just a reflection of the magnitude of the injustice.

Well, see for yourself:

http://www.cnn.com/video/?hpt=hp_t3#/video/politics/2012/11/26/ac-pkg-lah-police-chief-corruption.cnn%5B/quote%5D

Paramount,

NOBODY is condoning the corruption that happened in the city of Bell. NOBODY. That’s why the leaders there are being charged. They committed a number of very serious crimes and tried to work their way around laws and rules that cap income and pension benefits for public employees. That is not the norm, and it is not acceptable to any decent, hard-working public employee.

If you want to note cases of fraud, I can top everything you show with cases about individuals in the **private sector,** including people who bilk taxpayers via no-bid contracts, sales of grossly overvalued assets to govt entities, contracts for work that doesn’t exist, favorable zoning laws for projects that are detrimental to local residents (bribes to govt managers), roads/bridges being built that specifically benefit one party at the expense of all taxpayers, etc.

The huge bulk of fraud and abuse in government is a result of scams that originate in the PRIVATE SECTOR where there is much less oversight and transparency.

[poorgradstudent]

If the idea of living in Texas doesn’t make you shudder with fear and horror… there’s the door. Take care. Buh bye. Buh bye now. BUH BYE.

Seriously, millionaires paying slightly higher taxes isn’t going to destroy anything.

[spdrun]

It really depends what part of TX. Just like many Piggs probably wouldn’t want to live in Bakersfield. aka Texas West.

[ctr70]

Great post Paramount. Instead of cutting back on the criminal state retiree pensions and benefits, guess what, just tax the so called “rich” a little more. The people busting their butts in the CA private sector every day. Awe, who cares, it’s just a “little bit” more, they won’t notice it!

While the socialists in Sacramento sit on their butts all day thinking up ways to spike their pension benefits and dream up more stuff they can tax the so called rich to pay for.

This is what happens when you have a demographic make up in CA that is getting poorer and poorer and less and less educated. They just vote to tax “the rich” more. Who cares, they don’t have to pay any of the bills. The “rich” will pick up the whole tab. Pelosi must be proud of her body of work with CA now having the highest poverty rate in the U.S…beating out Mississippi.

[Author]

Posts